Ways to Pay for a Cremation

Cremation has become an increasingly popular end-of-life choice. If you're considering this option for yourself or for a family member, this guide to paying for cremation will help you decide which option is best for you and your loved ones.

How to Prepay for Cremation

From burial insurance to a cremation payment plan, there are several options for funding cremation. Here is a summary of each method, complete with advantages and disadvantages to think about before deciding.

Burial Insurance

Burial insurance, also known as funeral insurance, is a type of life insurance. It's purchased by the policyholder to cover end-of-life expenses after death, including cremation. It also covers associated expenses, such as the memorial service, casket, or urn.

During their lifetime, the purchaser will pay regular premiums for their burial insurance policy. The insurance company will then pay out a lump sum to the policy's nominated beneficiaries after the policyholder passes away, which the beneficiaries can use for final expenses. Payout is generally made quickly after death, so funds are available right away to pay for funeral service and cremation costs.

Pros

• Usually no medical exam is needed, making it quick and easy for anyone to purchase
• The value of the policy increases over time
• It usually costs less than traditional life insurance

Cons

• The benefit is usually lower than that of a traditional life insurance policy
• Some policies have a lower payout if the policyholder passes away within a few years of purchasing
• You might end up paying more in premiums than your beneficiary will ultimately receive

Life Insurance

Another way to fund cremation is through a life insurance policy. There are several different types of life insurance, but essentially, they all work in a similar way. The policyholder pays regular premiums throughout their lifetime or over a certain period, and after the policyholder passes away, a lump sum is paid out to the policy's beneficiaries, usually a relative or spouse.

Life insurance is generally designed to provide long-term financial support to the beneficiary after their loved one has passed, and is not designed specifically to cover funeral costs, although part of it can be used for that purpose.

Pros

• If you already have a life insurance policy, there's no need for additional coverage for end-of-life expenses
• Payouts are much higher than funeral insurance
• If the policy has dividends, its value will outstrip the rising costs of funerals

Cons

• Payments may take several weeks to several months, and may not be available in time for a funeral
• A "bridge loan" can cover the gap between the funeral and the insurance payout, but companies that offer these usually exact a hefty fee
• Age, preexisting health conditions, and gender impact how much your life insurance premiums will be

Prepaid Cremation Payment Plan

Anyone planning to engage the services of a local funeral home may wish to consider setting up a prepaid cremation payment plan. With this method, you'll set up an account directly with a local funeral home, which will pay for cremation costs.

Over time, you'll make payments to the funeral home, which will then be used to cover funeral expenses. You'll also be able to make decisions in advance regarding things like urns and specifics of the ceremony.

Most prepaid plans allow you to lock in prices at today's rates, so even if prices increase over time, your family won't be charged extra.

Pros

• Locking in cremation and funeral pricing now provides peace of mind for the future
• You can ensure your funeral is planned out in accordance with your preferences
• You can change and customize your plans

Cons

• If you relocate, there may be additional costs to switch your plan to a different funeral home
• Refunds can sometimes be difficult to obtain, or cancellation fees might be exacted

Payable-on-Death Account

As an alternative to insurance policies, some people might prefer setting up a payable-on-death account, also known as a POD account or a Totten trust. This is an account you can open with your local bank in the form of either a savings account or certificate of deposit. POD accounts are generally simpler to set up and maintain than a will or trust.

You can place a monetary amount of your choosing in the account. After your passing, the account immediately passes to your nominated beneficiary and doesn't have to go through probate.

Pros

• It's free and easy to set up with your preferred bank
• Payouts are very quick, upon presentation of a death certificate
• Payouts happen more quickly than a life insurance policy

Cons

• If your nominated beneficiary passes before you, the account will be sent to probate, as most accounts don't allow you to name an alternate beneficiary
• The beneficiary of the account may be subject to tax
• It doesn't protect the money within it from creditors if you have any debts after you pass away

Prepaying for Cremation

There are many benefits to prepaying for cremation. Although it can be difficult to think about, by prepaying for funeral and cremation expenses, it can relieve your family of both financial and emotional stress. With everything set up in advance, your family's time is freed up to mourn the loss, come together, and not have to worry about planning. It's one less thing for them to have to plan, which is a gift for those you love.

The Neptune Society is the nation's oldest and largest provider of affordable cremation services. Whether you have an immediate need or want to plan cremation services in advance, we are always available to assist you and your family. Call 1-800-NEPTUNE (800-637-8863) today or contact us online to learn more.